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Nokia claims ground in digital music battle

October 31, 2006

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“Consumers are increasingly snapping up mobile phones with built-in music players, and sales far outstrip shipments of dedicated MP3 music players” the world’s top handset maker Nokia said in an interview.

“The technology is completely ready, and the change in consumers’ habits has started. The best evidence is our sales number. We are selling huge amounts,” Tommi Mustonen, director at Nokia’s multimedia unit told Reuters in an interview.

Mustonen said the company aimed to sell 80 million music devices this year, up from 46.5 million in 2005.

Nokia is not alone. The world’s fourth-largest handset maker Sony Ericsson has benefited in recent quarters from strong sales of a line-up of Walkman music-playing handsets, of which it sold 15 million in its first year.

By contrast, Apple sold 8.7 million iPods in the July to September quarter, making it the world’s most popular music player, but the volume still lagged far behind music phones.

Mustonen said two out of three consumers whose phones can play digital tracks already use it for that purpose.

Nokia does not see Apple, with its iPods and iTunes service, as a competitor, at least not before the U.S. firm’s expected iPhone hits the shelves, Mustonen said.

“The comparison with iPod is wrong; it is a single purpose device, and it is not connected,” Mustonen said, adding that Apple was moving in the same direction with the possible launch of an iPhone, according to media and financial analysts.

“Then you can compare us,” Mustonen said.

“I believe our rivals are companies which make multimedia computers,” he said, adding that music downloading sites bore a close relationship to the gadgets they connect to.

The music business is also seen surging, with Forrester Research forecasting the European mobile phone music download market growing to $857.5 million (674 million euros) in 2011 from nil in 2004.

Only last week, Nokia launched a sales campaign offering Mission Impossible videos on memory cards for its N93 models. Mustonen said various campaigns were also possible in music, but the company had no plans to start selling music on memory cards.

“The world is going the other way, not towards physical distribution, but to digital.”

Nokia finalised its $60 million acquisition of U.S.-based digital music distributor Loudeye Corp. earlier this month.

Loudeye aggregates rights and content from major labels and hundreds of independent labels and currently offers licensed catalogue and complete media for over 1.6 million tracks.

“This enables us to offer full service to consumers starting from the device to the content,” Mustonen said.

Nokia is widely expected to come out with its own music shop next year.

Nokia has stepped up a gear on the acquisition trail after its new Chief Executive Olli-Pekka Kallasvuo took over in June. It has agreed to spin off its mobile networks infrastructure unit and dropped a planned phone-making venture with Sanyo.

Kallasvuo has said Nokia is set to strengthen its multimedia and enterprise units through acquisitions.

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